Letiole's response was accurate and to the point. More power to you if you can assist in pointing out excesses of Fed/St/Local employees abusing their programs. I have seen limited examples of this; and in all cases the supervisor spoke with the person and the behavior ceased.
I believe that you will find that most Govt employees are allowed to use the miles for upgrades alone, and that is what most of us do. It is a nice benefit, and it irritates the majority to see the few who abuse this type of program via personal use and/or selective flight choices to earn points.
Also note that a surprisingly high percentage of agencies on all levels (F/S/L) are self funded (mine included). As such, they do not rely on public funds, and are funded via charging for services. -Not via taxpayer dollars. Very similar to the approach an audit firm would take. Contrary to popular opinion, these agencies do not rely on public funds. Generally speaking, these self funded agencies are the ones which allow employees to use miles for upgrades.